Corporate Evaluation Study: ADB Trade Finance Program
Trade has long been recognized as an important tool for generating economic growth, for fostering competitiveness and integrating countries into the global market. Trade enhances a country’s access to goods, services, and technologies. Trade has been an engine of growth and poverty reduction in Asia and Pacific region. Trade finance provided by banks is a means and/or guarantee of payment, for international trade transactions. Trade finance has been described as the lifeblood of international trade because of the vital role it plays in assisting firms in managing trade risks.
This evaluation provides a feedback to the Management and the Board of Directors of the Asian Development Bank (ADB) on the performance of its Trade Finance Program (TFP) and related technical assistance (TA) from the program’s initial approval in 2003 to the end of 2013. The evaluation covers the program’s relevance and effectiveness in achieving program goals and objectives, ADB’s additionality, efficiency in resource use, and work quality. Recommendations to inform future operations are derived.
TFP has helped address the gap in the market for trade finance, is market oriented, and is able to respond quickly to requests. It has been a valuable tool in ADB’s countercyclical response to the 2008‒2009 global financial crisis. TFP has been scaled-up through an expanding network of collaborating country and international banks. Knowledge products financed by TFP have made an important contribution to country and global understanding of the low risks associated with trade finance. ADB support for the International Chamber of Commerce-ADB Register on International Trade Finance has contributed to wider global understanding of the relatively low risks involved in trade finance transactions.
The systems that were put in place to operate a small program in 2003 have been strained as the program has expanded. The program, while contributing to establishing a substantial trade finance network of domestic and international banks, needs to be more efficient and effective. TFP can achieve improvements in performance if it: (i) has a clearer, results-oriented plan; (ii) adequately staffs and operates the program using internal ADB resources rather than relying on external consultants; (iii) automates its transaction processing systems; and (iv) regularly tracks and reports on financial performance and its development results. TFP needs to state its program objectives more clearly. As an ongoing program subject to reviews by the ADB Board at intervals of no more than three years, there is scope to improve the program’s impact.